Financial Supervision Act (Wft)
Would you like to know if you, as an entrepreneur, require a permit for your investment fund or other financial product? Do you need assistance with applying for such a permit? JPR can help. Our experts know exactly how you can comply with legislation and will assist you with custom advice.
What about the Wft?
The Financial Supervision Act (Wft) regulates supervision of the financial sector in the Netherlands. This supervision is carried out by De Nederlandsche Bank (DNB) and the Dutch Authority for the Financial Markets. DNB is responsible for the so-called prudential supervision. This concerns regulating the finances and the financial policy of the institutions in the financial sector. In turn, the AFM is responsible for conduct supervision. This does not concern the actual finances of the institutions involved (banks, insurance companies), but issues such as 'Is everyone complying with the law?' and 'How do financial institutions conduct themselves with respect to clients?'.
The Financial Supervision Act (Wft) is one of the most extensive laws in the Netherlands containing hundreds of legal articles. In addition, the Wft is further detailed in general administrative measures and ministerial regulations, such as the Market Conduct Supervision (Financial Institutions) Decree. These administrative measures and ministerial regulations contain rules, which results in a high degree of complexity.
The Financial Supervision Act consists of several parts:
- The first part is called 'General Part'. Article 1:1 of the Wft records primary definitions that are vital for the proper understanding of the Wft.
- The second part is called 'Market Access Financial Institutions' in which access to the market is set out. Which financial activities require permits? And which requirements must be met to receive these permits?
- The third part is called 'Prudential Supervision of Financial Institutions'; the domain of DNB.
- The fourth part is called 'Market Conduct Supervision Financial Institutions'; the domain of the AFM.
- The fifth part is called 'Financial Markets Conduct Supervision'.
- The sixth part is called 'Extraordinary measures regarding the stability of the financial system'.
- The seventh part contains a number of final provisions.
Terms and definitions
The Financial Supervision Act is a law in which terms and definitions play a very important part (see Article 1:1 Wft). The difficulty here is that the definitions provided by the Wft for specific terms in turn contain terms that are then also defined separately in the Wft. This makes the Wft a difficult text to read. This fact combined with the sheer size of the Wft and the fact that there are many additional regulations in corresponding decrees and policy regulations means that sound knowledge and extensive experience with the Wft is a condition for the provision of sound advice. JPR has this knowledge. Moreover, JPR has a strong academic network of experts with respect to the Wft.
Prevent high fines and reputational damage
The Wft is vitally important for parties active in the financial market, such as banks, insurance companies, insurance intermediaries and stock brokers. DNB and the AFM strictly supervise compliance with the Wft. They have the legal authority to impose fines that could be very high depending on the severity of the infraction. Moreover, companies run the risk of reputational damage.
Important topics with respect to the Financial Supervision Act include the duty of care. The duty of care of financial service providers is an open standard. And thus up for discussion. A lot is known about the duty of care of insurance intermediaries. The insurer duty of care is still in development and courts seem to be interpreting it differently.
Other recent developments
- The commission ban changed a lot in the insurance market and it still leads to differences in interpretation.
- The statutory retention period under the Wft was 1 year at first, but has now been extended to 5 years. In practice, this still raises many questions.
- The suitability test has been expanded to include management personnel in 2015. In practice, the issue of how to perform this test and the possible (employment law) consequences are still a struggle.
- The Wft gives the intermediary rights in terms of a change of intermediary. But in practice, people can be stubborn. The liability risks deserve attention.
- The right to premium collection and the right to a portfolio and put under pressure. Does this still fit the new market model?